Residents and businesses could have a way to contest land bank deals that illegally acquire property if a two-bill package were to pass.
"State law intended all tax reverted properties to go before a public auction," Rep. Ken Yonker, R- Caledonia, the sponsor of House bill 4626, told the House Local Government Committee. "Land banks were supposed to be able to pick up these properties only if nobody else buys them. But what we've been seeing is land banks cherry-picking properties before the auction."
In the Grand Rapids area, the Kent County Land Bank has been getting first pick of delinquent and abandoned property. It bypasses a law that prohibits land banks from acquiring the properties before the auction by having local governments make the purchases on its behalf. Following these purchases the local governments quickly sell the properties to the land bank at cost.
Rep. Yonker said the land bank's pre-auction purchases fill its own coffers at the expense of taxpayers.
"This is taking the property off the tax rolls," he said. "The land bank purchases the properties for just what is owed in taxes but it turns around and sells them at the market value. As a result, the local community loses revenue on this property."
Grand Rapids area real estate agent Dan Hibma told the committee that the Kent County Land Bank is taking advantage of its close connections with local governments to increase both its operating capital and its influence on the real estate market.
"The land bank becomes a large private developer and it has purchased more than 200 properties (in Kent County) and [is] reselling them at large profits with no accountability to the tax payer," Hibma said.
In addition, Hibma described cases where residents were being evicted from homes with unpaid taxes, even though they would have been able to afford to stay in the homes if they could buy them at the same price the land bank got.
Another Grand Rapids area real estate agent, Charlie Curtis, told the committee that after acquiring the properties the Kent County Land Bank seems to give preferential treatment to some potential buyers over others.
"Certain non-profits are favored and there's no process to determine who the favored people are to get the benefits of the land bank distributions after the fact," Curtis said.
Sharon Hall testified that her non-profit, Recovery Academy, a Grand Rapids accessible housing organization, can't get any blighted properties because the land bank gets them all.
"We're trying to get people off the streets, especially women," Hall told the committee. "Some sleep in the park, in port-o-potties. Some die," she said. "The land bank has not served or tried to help us in helping to get the homeless off the street."
A coalition of local real estate groups and Realtor agencies maintains that the cozy purchasing transactions taking place between the land bank and the local governments violate the law. However, when the coalition went to court over the issue, Kent County Circuit Court Judge Ronald J. Vander Veen ruled that it had no standing to bring the lawsuit.
"This bill (House Bill 4626) would give them standing," Rep. Yonker said.
If enacted, the measure would establish a complaint process under which any person or business entity could file a complaint with the Department of Treasury if they thought a land bank had violated the law. The department would be required to make a written determination of its decision within 90 days. The department's decision could be appealed to the Circuit Court within 56 days after the determination.
The situation in Kent County coupled with concerns about land bank activities in Southeast Michigan provided the impetus behind the bipartisan legislation. Rep. David Rutledge, D-Ypsilanti, is the sponsor of the second bill in the package, House Bill 5083, which is designed to more clearly define "blight."
Rep. Yonker said the committee is expected to vote on both bills next week. If the legislation is approved by the committee, it would be sent to the full House for consideration.
The only opposition to the legislation voiced at Thursday's hearing came from Steven C. Liedel, of the Dykema Gossett law firm, which is representing the Michigan Association of County Treasurers. Liedel's concerns were technical in nature and pertained to language in the legislation he said could be problematic regarding enforcement.
Rep. Yonker said there are amendments already drafted to address many of those technical issues.
Sen. Virgil Smith, D-Detroit, attended Thursday's committee hearing and said land banks need examining.
"I'd have to look at the specific legislation before I could say whether I'd support the bills or not," Sen. Smith said. "But in my opinion we should look over our entire land banking process. I'm not sure that we should even have city land banks and I don’t think each land bank should be an island unto themselves."